Jefferies Group LLC today announced financial results for its
fiscal third quarter 2016.
Highlights for the three months ended August 31, 2016:
- Total Net Revenues of $654 million
- Total Sales and Trading Net Revenues of
$344 million
- Investment Banking Net Revenues of $295
million
- Earnings Before Income Taxes of $81
million
- Net Earnings of $41 million (tax rate
49.0%)
Rich Handler, Chairman and Chief Executive Officer, and Brian
Friedman, Chairman of the Executive Committee, commented: “We are
pleased to report quarterly revenues well above those for the same
period last year and consistent with our recent second quarter,
excluding the impact of the markup last quarter in two listed
equity positions, which had no meaningful impact on our third
quarter results. Aside from a volatile two week period following
the unexpected outcome of the UK ‘Brexit’ referendum in June, fixed
income and equity secondary market conditions remained reasonably
steady for much of the third quarter. However, new issue activity
continued to be slow industry-wide for most of the period.
Our equity net revenues were $148 million, compared to $224
million for the second quarter and $203 million for the third
quarter of last year. Two listed equity block positions, including
KCG, that were marked up by $60 million in the second quarter,
generated only about $2 million of further net total mark ups
during the third quarter. The same two positions, as well as two
additional securities positions that had an immaterial impact on
the third quarter results, were marked up by a net total of $66
million in the third quarter of last year.
Fixed Income net revenues were $195 million, compared to $238
million for the second quarter and up significantly from the poor
year-ago quarter of negative $18 million. Our sales and trading
credit businesses, including mortgages, corporates, leveraged
credit and our recently enhanced emerging markets business,
continued to perform well.
Investment banking net revenues were $295 million and reflect
solid advisory revenues, but a slower new issuance environment. Our
backlog for the fourth quarter represents the highest level of
backlog we have experienced this year. We have continued to expand
into new sub-sectors and geographies, as well as enhance existing
coverage.
Our average daily VaR for the third quarter was $6.62 million,
versus $8.25 million for the second quarter. The
quarter-over-quarter decrease reflects both a reduction in risk, as
well as lower asset price volatility. Average daily VaR for the
third quarter was the lowest we have recorded since the fourth
quarter of 2010."
The attached financial tables should be read in conjunction with
our Quarterly Report on Form 10-Q for the quarter ended
May 31, 2016 and our Annual Report on Form 10-K for the year
ended November 30, 2015. Amounts herein pertaining to
August 31, 2016 represent a preliminary estimate as of the
date of this earnings release and may be revised in our Quarterly
Report on Form 10-Q for the quarterly period ended August 31,
2016.
This release contains "forward-looking statements" within the
meaning of the safe harbor provisions of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Forward-looking statements include statements about
our future results and performance, including our future market
share and expected financial results. It is possible that the
actual results may differ materially from the anticipated results
indicated in these forward-looking statements. Please refer to our
most recent Annual Report on Form 10-K for a discussion of
important factors that could cause actual results to differ
materially from those projected in these forward-looking
statements.
Jefferies, the world's only independent full-service global
investment banking firm focused on serving clients for over 50
years, is a leader in providing insight, expertise and execution to
investors, companies and governments. Our firm provides a full
range of investment banking, sales, trading, research and strategy
across the spectrum of equities, fixed income and foreign exchange,
as well as wealth management, in the Americas, Europe and Asia.
Jefferies Group LLC is a wholly-owned subsidiary of Leucadia
National Corporation (NYSE: LUK), a diversified holding
company.
JEFFERIES GROUP LLC AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF EARNINGS (Amounts in Thousands)
(Unaudited)
Quarter Ended August 31, 2016 May 31, 2016
August 31, 2015 Revenues: Commissions and other fees
$ 152,044 $ 146,157 $ 172,284 Principal transactions 167,483
318,180 (50,297 ) Investment banking 294,930 253,046 389,820
Asset management fees and
investment income from managed funds
15,877 4,336 4,182 Interest income 213,716 220,175 230,805 Other
revenues 19,791 (4,977 ) 34,329 Total revenues
863,841 936,917 781,123 Interest expense 209,391 217,509
202,195 Net revenues 654,450 719,408
578,928 Non-interest expenses: Compensation and
benefits 376,438 415,316 336,499 Non-compensation expenses:
Floor brokerage and clearing fees 40,189 43,591 45,307 Technology
and communications 64,512 66,499 89,378 Occupancy and equipment
rental 24,987 24,926 25,967 Business development 20,259 22,587
30,527 Professional services 29,761 29,526 24,684 Other 17,582
14,366 19,473 Total non-compensation expenses
197,290 201,495 235,336 Total non-interest
expenses 573,728 616,811 571,835 Earnings
before income taxes 80,722 102,597 7,093 Income tax expense 39,564
48,655 4,609 Net earnings 41,158 53,942 2,484
Net earnings (loss) attributable to noncontrolling interests (11 )
44 427 Net earnings attributable to Jefferies Group
LLC $ 41,169 $ 53,898 $ 2,057 Pretax
operating margin 12.3 % 14.3 % 1.2 % Effective tax rate 49.0 % 47.4
% 65.0 %
JEFFERIES GROUP LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (Amounts in
Thousands) (Unaudited)
Nine Months Ended August 31, 2016 August 31,
2015 Revenues: Commissions and other fees $ 454,025 $
512,714 Principal transactions 382,290 211,142 Investment banking
778,906 1,066,077 Asset management fees and investmentincome (loss)
from managed funds 29,743 (5 ) Interest income 655,836 700,227
Other revenues (6,937 ) 82,810 Total revenues 2,293,863
2,572,965 Interest expense 621,018 610,811 Net
revenues 1,672,845 1,962,154 Non-interest
expenses: Compensation and benefits 1,141,497 1,182,484
Non-compensation expenses: Floor brokerage and clearing fees
124,259 159,100 Technology and communications 196,000 234,126
Occupancy and equipment rental 74,498 74,571 Business development
67,700 78,865 Professional services 82,799 76,359 Other 52,649
51,960 Total non-compensation expenses 597,905
674,981 Total non-interest expenses 1,739,402
1,857,465 Earnings (loss) before income taxes (66,557 )
104,689 Income tax expense 5,112 29,470 Net earnings
(loss) (71,669 ) 75,219 Net earnings attributable to noncontrolling
interests 77 1,647 Net earnings (loss) attributable
to Jefferies Group LLC $ (71,746 ) $ 73,572 Pretax
operating margin (4.0 )% 5.3 % Effective tax rate (7.7 )% 28.2 %
JEFFERIES GROUP LLC AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION (Amounts in Thousands,
Except Other Data) (Unaudited)
Quarter Ended August 31, 2016 May
31, 2016 August 31, 2015
Revenues by
Source
Equities $ 148,308 $ 223,540 $ 203,077 Fixed income (1) 195,335
238,486 (18,151 ) Total sales and trading 343,643
462,026 184,926 Equity 68,218 60,905
127,051 Debt 72,473 46,124 113,928 Capital
markets 140,691 107,029 240,979 Advisory 154,239 146,017
148,841 Total investment banking 294,930
253,046 389,820 Asset management fees and
investment income (losses)from managed funds: Asset management fees
7,610 6,964 7,067 Investment income (losses) from managed funds
8,267 (2,628 ) (2,885 ) Total 15,877 4,336
4,182
Net revenues $ 654,450
$ 719,408 $ 578,928
Other
Data
Number of trading days 65 64 65 Number of trading loss days 8 2 21
Number of trading loss days excluding KCG 4 1 18 Average
firmwide VaR (in millions) (2) $ 6.62 $ 8.25 $ 13.77 Average
firmwide VaR excluding KCG (in millions) (2) $ 4.48 $ 6.04 $ 12.16
(1) The results for the quarter ended August 31, 2015
include $4.3 million of negative revenues globally from the Bache
business. At May 31, 2016, we have transferred all of our client
accounts to Société Générale S.A. and other brokers and completed
the exit of the Bache business. (2) VaR estimates the potential
loss in value of our trading positions due to adverse market
movements over a one-day time horizon with a 95% confidence level.
For a further discussion of the calculation of VaR, see
"Value-at-Risk" in Part II, Item 7 "Management's Discussion and
Analysis" in our Annual Report on Form 10-K for the year ended
November 30, 2015.
JEFFERIES GROUP LLC AND
SUBSIDIARIES SELECTED STATISTICAL INFORMATION
(Amounts in Thousands, Except Other Data) (Unaudited)
Nine Months Ended
August 31, 2016 August 31, 2015
Revenues by
Source
Equities $ 373,593 $ 634,754 Fixed income (1) 490,603
261,328 Total sales and trading 864,196 896,082
Equity 173,122 314,927 Debt 175,870 329,474
Capital markets 348,992 644,401 Advisory 429,914
421,676 Total investment banking 778,906 1,066,077
Asset management fees and investment income (losses)
from managed funds: Asset management fees 25,779 25,955 Investment
income (losses) from managed funds 3,964 (25,960 ) Total
29,743 (5 )
Net revenues $ 1,672,845
$ 1,962,154
Other
Data
Number of trading days 190 189 Number of trading loss days 27 42
Number of trading loss days excluding KCG 17 32 Average
firmwide VaR (in millions) (2) $ 7.73 $ 13.29 Average firmwide VaR
excluding KCG (in millions) (2) $ 5.72 $ 10.47 (1)
The results for the nine months ended August 31, 2015 include $80.6
million of net revenues globally from the Bache business. At May
31, 2016, we have transferred all of our client accounts to Société
Générale S.A. and other brokers and completed the exit of the Bache
business. (2) VaR estimates the potential loss in value of our
trading positions due to adverse market movements over a one-day
time horizon with a 95% confidence level. For a further discussion
of the calculation of VaR, see "Value-at-Risk" in Part II, Item 7
"Management's Discussion and Analysis" in our Annual Report on Form
10-K for the year ended November 30, 2015.
JEFFERIES GROUP LLC AND SUBSIDIARIES FINANCIAL
HIGHLIGHTS (Amounts in Millions, Except Where Noted)
(Unaudited)
Quarter Ended August 31, 2016 May 31, 2016
August 31, 2015
Financial
position:
Total assets (1) $ 38,128 $ 37,120 $ 42,783 Average total assets
for the period (1) $ 42,270 $ 43,549 $ 48,327 Average total assets
less goodwill and intangible assets for the period (1) $ 40,408 $
41,678 $ 46,432 Cash and cash equivalents (1) $ 3,159 $
2,839 $ 3,442 Cash and cash equivalents and other sources of
liquidity (1) (2) $ 5,020 $ 4,603 $ 5,151 Cash and cash equivalents
and other sources of liquidity - % total assets (1) (2) 13.2 % 12.4
% 12.0 %
Cash and cash equivalents and other
sources of liquidity - % total assets lessgoodwill and intangible
assets (1) (2)
13.8 % 13.1 % 12.6 % Financial instruments owned (1) $
14,328 $ 15,119 $ 18,892 Goodwill and intangible assets (1) $ 1,856
$ 1,871 $ 1,891 Total equity (including noncontrolling
interests) $ 5,324 $ 5,344 $ 5,514 Total member's equity $ 5,319 $
5,339 $ 5,481 Tangible member's equity (3) $ 3,463 $ 3,468 $ 3,590
Level 3 financial
instruments:
Level 3 financial instruments owned (1) (4) $ 437 $ 436 $ 474 Level
3 financial instruments owned - % total assets (1) 1.1 % 1.2 % 1.1
% Level 3 financial instruments owned - % total financial
instruments (1) 3.0 % 2.9 % 2.5 % Level 3 financial instruments
owned - % tangible member's equity (1) 12.6 % 12.6 % 13.2 %
Other data and
financial ratios:
Total long-term capital (1) (5) $ 10,800 $ 10,729 $ 10,849 Leverage
ratio (1) (6) 7.2 6.9 7.8 Adjusted leverage ratio (1) (7) 8.7 9.0
10.3 Tangible gross leverage ratio (1) (8) 10.5 10.2 11.4
Number of trading days 65 64 65 Number of trading loss days 8 2 21
Number of trading loss days excluding KCG 4 1 18 Average firmwide
VaR (9) $ 6.62 $ 8.25 $ 13.77 Average firmwide VaR excluding KCG
(9) $ 4.48 $ 6.04 $ 12.16 Number of employees, at period end
3,323 3,279 3,665
JEFFERIES GROUP LLC AND
SUBSIDIARIES FINANCIAL HIGHLIGHTS - FOOTNOTES (1)
Amounts pertaining to August 31, 2016 represent a preliminary
estimate as of the date of this earnings release and may be revised
in our Quarterly Report on Form 10-Q for the quarterly period ended
August 31, 2016. (2) At August 31, 2016, other sources of
liquidity include high quality sovereign government securities and
reverse repurchase agreements collateralized by U.S. government
securities and other high quality sovereign government securities
of $1,449 million, in aggregate, and $412 million, being the total
of the estimated amount of additional secured financing that could
be reasonably expected to be obtained from our financial
instruments that are currently not pledged at reasonable financing
haircuts. At August 31, 2015 amounts also included additional funds
that were available under the committed senior secured revolving
credit facility available for the working capital needs of
Jefferies Bache. The corresponding amounts included in other
sources of liquidity at May 31, 2016 were $1,096 million and $669
million, respectively, and at August 31, 2015, were $1,263 million
and $446 million, respectively. (3) Tangible member's equity
(a non-GAAP financial measure) represents total member's equity
less goodwill and identifiable intangible assets. We believe that
tangible member's equity is meaningful for valuation purposes, as
financial companies are often measured as a multiple of tangible
member's equity, making these ratios meaningful for investors.
(4) Level 3 financial instruments represent those financial
instruments classified as such under Accounting Standards
Codification 820, accounted for at fair value and included within
Financial instruments owned. (5) At August 31, 2016, May 31,
2016 and August 31, 2015, total long-term capital includes our
long-term debt of $5,476 million, $5,385 million and $5,335
million, respectively, and total equity. Long-term debt included in
total long-term capital is reduced by amounts that are non-recourse
to Jefferies Group LLC and the amount of debt maturing in less than
one year, where applicable. (6) Leverage ratio equals total
assets divided by total equity. (7) Adjusted leverage ratio
(a non-GAAP financial measure) equals adjusted assets divided by
tangible total equity, being total equity less goodwill and
identifiable intangible assets. Adjusted assets (a non-GAAP
financial measure) equals total assets less securities borrowed,
securities purchased under agreements to resell, cash and
securities segregated, goodwill and identifiable intangibles plus
financial instruments sold, not yet purchased (net of derivative
liabilities). At August 31, 2016, May 31, 2016 and August 31, 2015,
adjusted assets were $30,318 million, $31,173 million and $37,240
million, respectively. We believe that adjusted assets is a
meaningful measure as it excludes certain assets that are
considered of lower risk as they are generally self-financed by
customer liabilities through our securities lending activities.
(8) Tangible gross leverage ratio (a non-GAAP financial
measure) equals total assets less goodwill and identifiable
intangible assets divided by tangible member's equity. The tangible
gross leverage ratio is used by rating agencies in assessing our
leverage ratio. (9) VaR estimates the potential loss in
value of our trading positions due to adverse market movements over
a one-day time horizon with a 95% confidence level. For a further
discussion of the calculation of VaR, see "Value-at-Risk" in Part
II, Item 7 "Management's Discussion and Analysis" in our Annual
Report on Form 10-K for the year ended November 30, 2015.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160920005617/en/
Jefferies Group LLCPeregrine C. Broadbent, 212-284-2338Chief
Financial Officer
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